Consulting Prep

Summer Placements 2009

What is Consulting?
$125 Billion Industry
 The first management consulting firm was Aurthur
D Little, founded in1886 by the MIT professor of the
same name.
 McKinsey & Company Inc. was founded in
Chicago during 1926 by James O McKinsey
 Andrew T. Kearney started A.T Kearney in 1937
 Boston Consulting Group was founded in 1963
 Management consulting has grown quickly, with
growth rates of the industry exceeding 20% in the
1980s and 1990s
 In 2004, revenues were up 3% over the previous year,
yielding amarket size of $125 billion.
Case Interview: It’s the Business
 What is a Case Interview ?
 Analysis of a business question
 Interactive process - ask logical questions
 No specific answer - analytical & creative thought
process-
 Out of box
 Why Cases ?
 Interaction with clients and colleagues
 Understand the granular problem simultaneously
aggregating to see the big picture
 No traditional workplace environment – Manage
circumstances with professionalism and excellence
Types of Case Interviews
 Business Case : business scenario and
asked to analyze it and make
recommendations
 Guesstimates: back of the envelope
calculations
 Brainteasers: logic puzzles
 Industry Analysis
Frequently asked Business Cases
 Falling Profits Case
 New Product Introduction
 Entering a New Market
 Entering a New Geographic Market
 Site Selection Case
 Merger & Acquisitions Case
 Competitive Response Case
 Changes in Government/Regulatory
Environment
Basic Concepts & Frameworks
 Cost-benefit analysis
 Fixed Vs Variable costs
 Basic overview of financial statements
 Net Present Value
Strategic Tools & Frameworks
 External Environment: PEST Analysis

QUANTITATIVE PEST
ANALYSIS
External Factor Evaluation Matrix
•Weights assigned as
00 = Not important to 1 = Very
Important
•Scores assigned as follows:
1 = minor threat
2=major threat
3=minor opportunity
4=major opportunity
Industry Analysis :Porter’s Five Forces
SWOT Analysis
You conduct a SWOT analysis on your competitors and on
your own organization
PepsiCo - Example

WEAKNESSES
STRENGTHS
Distribution Channel specially in rural
Snack food and Beverage company
market
Diversified portfolio
Supply shortage
Strong Brand
Product awareness
CSR initiatives
Packaging

SWOT ANALYSIS

THREATS
OPPORTUNITIES
Local competition
Super Healthy Foods
Duplicate drinks
Indian Beverages - Be Global think Local
Customer switching due to non availability
Modern Retail Formats
People becoming more health concious
Awareness of health and Wellness
Water tables going down
Drink for the common man
Soceital pressure
4 P Analysis + 3P (Services)?
BCG Matrix
While its importance has diminished, the BCG matrix still can serve as a
simple tool for viewing a corporation's business portfolio at a glance, and
may serve as a starting point for discussing resource allocation among
strategic business units.
Ansoff Matrix
It is used by marketers who have objectives for growth. Ansoff's matrix
offers strategic choices to achieve the objectives. Example ITC
Value Chain Analysis
Economics Frameworks
 Law of Supply & Demand
 Law of Diminishing Marginal Utility
 Law of Diminishing Returns
 Fixed Costs Vs. Variable Costs
 Breakeven Point
Finance & Accounting Frameworks
Net Present Value

 Net Present value of the future cash flows

Weighted Average Cost of Capital
(WACC)
Capital Asset Pricing Model (CAPM)

 Where Re is the discount rate, Rf is the risk-

free rate of return, Rm is the market rate of
return and β is the beta of the investment
Cost Driver Analysis
Case Interviews
Practice Case – Losing profitability
Practice Case - International Entry
Free internet access by an ISP
 GOTONet, an ISP in US, considering
entering the European markets
 European market dominated player who offers
consumers free Internet access
 GOTONet hopes to capture a customer base of
8 MM subscribers
 Currently GOTONet subscribers pay $ 25 per
month for access
 The average GOTONet subscriber purchases
$900 annually on the net – of these purchases,
GOTONet receives a 3 % commission.
 Fixed Costs are $1.3 B and variable costs amount
to $ 800 MM annually
 Free internet access by an ISP
Objective of case
1. Determine current net income (before
taxes)
2. What is the current profit margin?
3. Will profitability be sustained if the monthly
subscription reduced to zero?
4. If not, how much would the average
consumer need to increase spending by to
make up for the loss in subscription fees?
Free internet access by an ISP
Case solution
Free internet access by an ISP
Case solution
Guesstimates
 Embedded in a business case or
independently
 Always work toward final answer
 Not expected to get the exact number
 Interviewer may provide directions or
you will have to make assumptions
 The extra step
 Multiple approaches
How many children are born every
day in the United States?
References
 http://www.mckinsey.com/careers/how_do_i
_apply/how_to_do well in the interview.aspx
 Interactive cases in ‘Careers’ section of
website- McKinsey, BCG, ATK, Bain
 Vault – case interviews
 AceTheCase
 Vault – Career guide to consulting
 How_Would_You_Move_Mount_Fuji
 Consulting case overview (Wetfeet)
Industry Knowledge
 What do you need to know ?
 Brief History of Industry
 Major policy changes
 Growth Rate
 Value Chain Analysis
 Growth Drivers
 Current Scene
 FDI , FII
 Major Players
 Market Share
 Growth Rate
 Contribution to India’s economy
◦ Employment generated
◦ GDP contribution
 Recent M&A, expansions etc.
 Discussion of Scenarios of Future Industry Roadmap
 www.ibef.org
In a Nutshell.. To Crack !
 Practice Cases
 Industry knowledge
 Know your CV
Thanks